Trimming earnings and TP; maintain BUY

Swift Haulage’s (Swift) FY22 core net profit (CNP) of MYR47.3m (+3% YoY) came in slightly below expectations at 92%/87% of ours/consensus’ FY forecasts. We trim CNP by 4%/2% for FY23/24E and introduce our projection for FY25E, as we reflect lower sales from lower volume handled. We lower our TP by 9% to MYR0.58 (from MYR0.64), pegged to an unchanged EV/EBITDA multiple of 7.0x, in-line with its peers’ 5-year historical EV/EBITDA median multiple. Maintain BUY.

Inflated costs partly offset higher sales recorded

FY22 CNP improvement (+3% YoY) was inline with the higher revenue (+10% YoY), mainly driven by its prime mover fleet expansion during the year, increased warehouse capacity, easing of COVID-19 restrictions and recovery of business activities. All operating segments recorded improved revenue, ie. container haulage (+2% YoY, which could be due to higher volume handled, but EBIT was down -19% YoY), land transportation (+21% YoY, on the back of higher cross border trips and improved rates, whilst EBIT rose 22%), warehousing & container depot (+9% YoY, post capacity expansion), and freight forwarding (+9% YoY, we believe was due to more jobs handled).

Warehouse expansions lifted 4Q22 performance

4Q22 CNP increased by +4% QoQ to MYR11.2m on the back of +4% QoQ revenue improvement. Stronger performances from land transportation, warehousing & container depot segment and freight forwarding segment (revenue increased by +10% QoQ, +13% QoQ and +7% QoQ respectively) more than offset the slowdown in container haulage segment (-3% QoQ).

More warehouse expansion in the pipeline

There were 3 new warehouses completed and which commenced operation in FY22, increasing Swift’s warehouse capacity by c.46%. This is expected to contribute positively the group’s earnings moving forward as utilization rate picks up and following the full year contribution from the new warehouses. Additionally, the group has also announced further warehouse expansion in FY23E, ie. to construct 2 more warehouses, adding another 31% warehouse space to the group’s existing capacity.

Source: Maybank Research - 28 Feb 2023